ARTICLES ABOUT DEFENSE INDUSTRY BY DATE - PAGE 2

Considering the steep dive that shares of the nation's largest defense stocks have taken in the past six months despite a huge military buildup in the Persian Gulf, the big question now becomes: How soon before they bounce back? Will defense stocks continue to sink if it becomes clear that a quick war in Iraq won't translate into big profits? While short wars lead the military to buy more missiles and bullets, that's usually where their benefits end. Or will defense stocks recover quickly as investors realize that -- war or not -- military budgets are still going to rise?

Take a multibillion-dollar buyout, add in some bad quarterly results, sprinkle a little industry uncertainty and simmer in a general steam of stockholder distrust -- it all adds up to a steep Northrop Grumman Corp. stock price dive since September. The stock price for Northrop Grumman, the parent company of the Newport News shipyard, closed at $97.40 per share Monday, meaning its value has fallen by nearly one-third since hitting $128 in mid-September. Its highest price over the past year was $135 per share in mid-June.

Defense industry is eroding We are witnessing the death of a core national defense industry. It has become apparent that company greed has done more damage to the nuclear shipbuilding industry than any foreign threat ever has. Last fall, several hundred of our most experienced workers left the Newport News shipyard for civil service jobs at the naval shipyard in Portsmouth. Last month several hundred more left for retirement. Several hundred more will retire by the end of the year.

The consensus among some defense-industry analysts is that Vermont Sen. Jim Jeffords' switch from the Republican Party to independent will do little to change the landscape for military financing. That landscape still looks pretty, the financial experts say. Yes, the switch gives Democrats control of the Senate. And, yes, investors generally think that Democrats are more tight-fisted than Republicans regarding military spending. The drop in stock prices for defense companies shortly after Jeffords' announced change reflected that concern.

The Department of Justice's request for more information from General Dynamics in its bid to acquire Newport News Shipbuilding for $2.6 billion is doing more than just buying time for the U.S. government. It's also giving stockholders more time to review the General Dynamics deal and the unsolicited counter-bid by Northrop Grumman -- and raising hopes among investors that the two defense giants could open fire on a bidding war for the local shipyard. When General Dynamics and Newport News Shipbuilding first announced their agreement for the buyout April 25, analysts and investors figured it was a done deal at $67.50 per share.

Lockheed Martin Chairman and Chief Executive Officer Vance D. Coffman stood at the podium, facing 500 or so of the defense industry's top analysts, executives and experts at the Plaza Hotel in New York City. He waited for questions about his company, one of the top in the field with about $25 billion in sales for 2000. "Let's play some hardball now," one analyst said. The room tensed. "What do you think is going to happen with this deal about Newport News, General Dynamics and Northrop Grumman?"

It's clear what makes Newport News Shipbuilding such a great prize for bigger defense companies. But now, the U.S. government, the local company board of directors and stockholders have to consider what's the best fit for the Peninsula shipyard. Whether the Newport News yard winds up with General Dynamics or Northrop Grumman, the local company is poised to sit down at the main table of defense contractors. It's more than just a question of being bigger -- although that's certainly the case.

'This merger is yet another in a long line of defense industry mergers which are the direct result of two key factors: the many years of reduced defense budgets under both Republican and Democrat administrations and strong competition from businesses abroad, many of which are establishing U.S. subsidiaries. -- U.S. Sen. John Warner, R-Va. "I believe that having two nuclear-based shipbuilding facilities with the advantages of common ownership will be beneficial to our national security needs."

As far as Wall Street is concerned, any intention of the Bush administration to revamp the design of aircraft carriers only affirms the direction in which Newport News Shipbuilding has started to head. In its plans for the next class of carrier, the shipyard has incorporated many of the changes that Washington insiders expect Defense Secretary Donald Rumsfeld to propose for the Navy, according to James L. Winchester, a defense industry analyst for Lazard Freres & Co. in New York City.

Newport News Shipbuilding stock prices did better in 2000 than those of any other defense contractor covered by Wall Street analyst Credit Suisse First Boston, or CSFB, the New York company reported on Thursday. "The stock was the single best performer in our universe of defense stocks in 2000 - increasing 89 percent vs. a 32 percent increase for its defense peers," CSFB defense analysts Pierre Chao and Adam B. Weiner reported. The Standard & Poor 500, a Wall Street yardstick for big-company stocks, declined 10 percent in 2000.